There are those who argue that for growth it is necessary to make a deficit and those who reduce it, but everyone agrees that for medium-long term sustainable growth it is necessary to increase the productivity of the economic system. Investments that incorporate new technologies are an essential element of increasing productivity as well as the skills of workers and managers. But the context in which capital and labor are used is also essential. If we break down growth into its components, as in the figure below, we see that it was not investment or labour, but total productivity, which includes the institutional and political context, that drove growth in boom Italy. And growth slowed down when total productivity (Tfp) became negative, despite practically constant contributions, in the last two decades illustrated, by capital and labour.
There is equal consensus on the causes of the negative growth differential in total productivity in Italy compared to the other major advanced economies since the beginning of the XNUMXs: small size of firms, family management, failure to reallocate resources, or failure to exit the market of decayed companies that have trapped important resources of capital and labour. Furthermore, in Italy there has been a lack of re-training of workers to allow their placement in efficient and growing companies, and changes in school curricula to provide the skills required by contemporary society even before the market, and both public and private investments have collapsed. Finally, the inefficiency of the Public Administration, now undergoing reform, is aggravated by the interactions with the administrative and civil justice still to be reformed. To remove these causes, are the reforms to be made really small, as someone claims?
For some years, or since firm-level data was made available -by private individuals-, our knowledge of productivity has increased enormously and the OECD was the first institution to study this data and draw conclusions: in firms at the frontier productivity grows on average by 2,5% per year (labour productivity by 3,5%), i.e. as in the best post-war years. But the diffusion of technologies to companies that are not at the forefront is no longer happening at the same pace as it was then, creating an ever-deepening gap between companies because the diffusion of digital technologies occurs at an increasing speed and contributes to divergences in aggregate productivity growth between countries (Van Ark et al 2008) or the medium-long term growth potential.
In another study (Determinants of digital technology use by companies, 2017) the OECD finds that only 50% of the 250 units examined in 19 countries between 2000 and 2012 have increased spending on software since 2006 and are those of larger, in knowledge-intensive sectors and headquarters. The effects of the policies are different for the different types of enterprise: credit facilitation policies favor the most recent plants, labor market and business environment policies are in favor of the use of tangible ICT, less for intangible ICT (technologies software). It is therefore of paramount importance to know the composition of enterprises to select relevant policies and to understand the use of ICT as a service and open source software in different countries to identify the next generation of digitalisation.
Therefore, the (small?) reforms for the recovery of productivity are easy to list:
1. Size of companies: you cannot compete globally and introduce advanced technologies without an adequate structure that small companies cannot have. The industrial policy measures that are useful in this regard are the incentives to grow: it is necessary to design incentives for small businesses that are reduced over time and are canceled after a few years. With our structure of companies, more than 90% small, it will not be easy to imitate Macron which is certainly helped by the fact that France has an industrial structure less biased towards smaller companies.
2. Misallocation of resources: it is due to sticky exit procedures of defunct companies in addition to the entry difficulties of new companies: finance plays a role in the non-reallocation because banks prefer not to have to cancel NPLs from their accounts, therefore they continue to finance companies zombies rather than start-ups; the inefficiency of civil justice plays a role in this behavior of the banks, due to the difficulty in using loan collateral in historic times, but also due to the cumbersome insolvency procedures that benefit bankruptcy trustees and various speculators. And let's not open the Pandora's box of administrative justice. While the specter of the inefficiency of the Public Administration and the slowness and inconsistency (unpredictability) of the civil justice keeps away foreign investors and in particular the high tech companies that need protection of intellectual property rights.
For their part, the abuses of the redundancy fund (Cig) are insurance for the misallocation of resources when applied to zombie companies.
3. Public investments: the European rules for fiscal consolidation do not adopt the golden rule which excludes investments from the calculation of the deficit. It is true that the rule is open to abuse, but above all it requires a great ability of the administration to select, design, implement and monitor projects. We have to develop this ability in Italy. Just look at the modest results after two years of the Junker Plan, which has also attracted numerous, well-paid experts from all over Europe, to understand that it won't be quick. Further confirmation comes from Chancellor Merkel, who declares that in Germany it is not funding, but the ability to plan public investments that is lacking and Germany has a public administration that has an excellent reputation at the federal level, less good at the of landers.
4. The easiest reforms are additive ones, which do not inflict losses on vested interests. In Italy, but not only there, the mismatch between the skills required in the workplace and those available is wide and we could imitate the English example of introducing coding and programming as teaching from elementary school. With children learning this language in a simple way – algorithms such as instruction sets – parents can familiarize themselves with the subject, aiding continuing professional education. It is a logic education approach, starting with Bolean logic, that helps all subjects, overcoming the passive learning of digital programs that will be obsolete when students land on the job market. In addition to procuring the missing link between school and the world of work, such a program would fit well into the reform of the Good School and the weighty National Plan for the digital school which has already trained, at least on paper, thousands of teachers. But it should use resources made available by universities and above all by companies in the sector, perhaps even free of charge as happens in the UK.
5. Training Centres, together with apprenticeship schemes, are immediately the key to directly solving the major problem for inclusive growth, i.e. the unemployment of young people and people with fewer technical skills. However, the non-approval of the institutional referendum has left many active labor policies to the regions and the culture of rapid evaluation and correction of programs has not yet penetrated the bureaucracies that manage them. In this field, as in that of public investment, we should act in coordination with the EU, decisively improving both the Junker Plan and the Youth Guarantee.
In conclusion, we must not underestimate the political effort, at national and European level, to implement the structural reforms necessary to increase productivity, but this is the only way to ensure that inclusive growth does not remain a formula for good communication.
